OPEC Output Drops 330,000 Barrels Per Day in April

OPEC's 11 members, including Iraq,
pumped an average 28.07-mil b/d of crude in April, down 330,000 b/d from
28.4-mil b/d in March, a Platts survey of OPEC and oil industry officials
showed.

Excluding Iraq, which does not participate in OPEC output accords, the 10
members bound by quotas produced an average 25.69-mil b/d in April, down
370,000 b/d from 26.06-mil b/d in March, but 2.19-mil b/d more than their
23.5-mil b/d ceiling, which came into effect April 1.

"These numbers show that OPEC never came close to implementing its
1-million b/d cut in April, and all our early reports for May and even into
June show no further significant cuts likely. That's the good news for
consumers," said John Kingston, global director of oil for Platts. "The bad
news is that we are well into the second quarter, when a hefty level of OPEC
production was supposed to collide with the traditional weak demand period and
push prices downward. That is obviously not happening, and that's troubling
to the economy."

Expectations of a significant cut in actual output had not been high,
given historically strong oil prices, which have persisted into the second
quarter despite OPEC warnings of a substantial fall in demand. Indeed,
several ministers have said since the controversial 1-mil b/d ceiling cut
agreement in February that OPEC will supply what the market needs, regardless
of what the group's official ceiling might be.

"There may be pressure on OPEC to rethink its output policy," Kingston
stated. "Even though it did not cut what it said it would, it still did put
less oil on to the market than it had in the prior month."

Only Indonesia, whose crude output is declining, and Venezuela, whose
upstream industry has yet to recover fully from a crippling two-month oil
strike in the winter of 2002-2003, produced within their official quotas.
Iran, Kuwait, Nigeria, Qatar, Saudi Arabia, the UAE and Venezuela cut output
by volumes ranging between 10,000 b/d and 140,000 b/d. The biggest single cut
came from the UAE, which has been carrying out some offshore maintenance.

Saudi Arabia cut production by 120,000 b/d over the month, but its 8.3-mil
b/d April average left the kingdom overproducing its 7.638-mil b/d quota by
more than 670,000 b/d. Iran, estimated to have pumped 3.88-mil b/d in April
against 3.9-mil b/d in March, overproduced its 3.45-mil b/d quota by 430,000
b/d.

Iraq, which does not have a quota, boosted its average output by 40,000
b/d over the month to produce an average 2.38-mil b/d. Sabotage against oil
facilities has continued both north and south, but Iraq intermittently has
been able to pump Kirkuk crude along the northern pipeline to Turkish
Mediterranean port Ceyhan. April saw 7.6-mil barrels of Kirkuk, sold by
tender, lifted from Ceyhan.

OPEC officially is next scheduled to meet June 3 in the Lebanese capital
Beirut, but ministers plan to hold informal talks on the sidelines of the
International Energy Forum, a meeting of oil producing and consuming
countries, which convenes in Amsterdam May 22-24.

OPEC, which has been warning of a price collapse for several months,
continues to insist that oil markets are well supplied. But a senior delegate
admitted this week that the cartel was "concerned" about the high oil prices,
with US light crude futures climbing toward $40/bbl. The delegate, however,
declined to discuss whether OPEC might raise its official ceiling at the June
meeting.